Whether you’ve recently gotten lucky or scrimped and saved for a few years, knowing what to do with 50k is essential.
Having money in the bank is a unique opportunity. It means you can grow it and have an ever larger safety net.
So, how can you get started, and what are the smartest options? Allow us to take you through what to do with 50k in savings!
How much is $50k and how can you get it?
You may have a significant payout from a previous job or even receive an inheritance from a loved one.
In addition, when you start to cut back, use effective money-saving tips, and use high-interest accounts, you may find that the cents start to turn into dollars fast.
At first glance, $50,000 may sound like a huge chunk of money. If you’re working a minimum-wage job or don’t have a gigantic salary, you could feel that it’s out of reach.
However, the truth is that saving $50,000 is viable for many of us. At the very least, it’s a good goal to have.
And no matter how you have come to have $50,000 in your bank, you need to know how to use it.
What to do with $50k before you invest it!
If you’re lucky enough to have 50k in cash, the obvious move is to invest it. However, before you look into your options here, there are two things to consider.
Getting yourself into a strong financial position is the first step of the process. With that in mind, here are a couple of the admin tasks you should take care of first:
Pay off your debts
It’s much easier to land yourself in debt than it is to get out of it. If you owe money, now is the time to settle things once and for all.
That means paying off any credit cards you have or repaying outstanding loans.
If you haven’t already got a debt reduction plan in place, now is a good time to get started.
In some cases, you will be able to wipe the debt completely with one large payment. You need to check the small print of any loans you have taken out in the past.
Paying off debts is rarely a fast process. However, armed with the 50k in cash, you are in a better position than most people.
Figure out a payment plan that works for you — and your other investment plans — and take things from there.
Create an emergency fund
Unless you have a crystal ball, chances are you can’t see into the future. Since you don’t know what will happen in the months or years to come, you need to have an emergency fund.
Putting cash aside in case you ever need it will give you a sense of security. Having this pot in place can help you should you face sudden costs, such as:
Ensuring that the fund is ready and waiting for you will give you the peace of mind that you need. When the unexpected happens, you will be in the best position to deal with it.
11 Smart ways to grow $50k in cash
If you need to know what to do with 50k in savings, the important thing is don’t let it go to waste. You can find a wealth of tips in the Clever Girl Finance book, Learn How Investing Works Grow Your Money.
If you’re wondering how you can make your money work for you, here are some ideas to get you started:
1. Invest in index funds
If you want to build a successful financial future, you may want to make investing in index funds a part of your long-term strategy.
Index funds are types of stock market investments that follow and track stock market indexes like the S&P 500 and are typically low cost.
For example, if you invest in an index that tracks the S&P 500, you will be invested in the 500 companies that make up the S&P 500.
When you buy into an index fund, you are essentially investing in every single stock within that fund. It doesn’t end there.
You could also invest in a total market index fund, which splits your money equally across the entire stock market.
2. Buy a rental property
$50,000 makes a nice down payment if you’re looking to invest in the property market. One of the most effective ways to capitalize on the market is to buy a house to rent.
While there are additional costs associated with this investment, it could make you a good income.
Before you get started with this venture, consider the logistics of it.
Will you use a management agency to let the property out for you? How “hands-on” do you expect to be? What extra money will you need to maintain the property to a high standard?
If you can answer these questions, you may be in a good position to invest in a rental home.
3. Start a business
Did you know that you could start a business with 50K? If you’ve been thinking about launching a side hustle or business, you can use this money to get things off the ground.
A massive 99.9% of US businesses are small businesses. Read our guide on how to start a business from scratch before you begin planning out your next business venture.
Of course, there’s a whole world of business opportunities out there. You may want to start a business with 50k by setting up a hospitality venture, such as a cafe or a bar.
On the other hand, there’s always the option to start an online store selling bespoke products to a wider audience.
Think about what your personal interests are and how you can translate them into a startup business.
4. Flip a house
House flipping means buying an old property that desperately needs work, making it over, and then selling it for a profit. Average gross profits on home flips can be quite good.
When considering whether this option works for you, you will need to take into account how much the renovations will cost, any tradesmen fees, and the price of the property. You will need a surveyor to take a look at the property before you go ahead and buy it.
Understanding the extent of the work that needs to be done is essential to the investment.
5. Invest in saving bonds
Next up, let’s talk about a traditional way to boost your capital: saving bonds. When you’re deciding what to do with 50K, this is one of the most straightforward options.
Put simply, you buy a bond at face value, wait for it to mature, and then reap the rewards.
If you’re unsure where to start when it comes to investing your money, a saving bond is an ideal option. These are low-risk investments, which means that you aren’t going to lose all of your $50,000 in one unfortunate move. You can rest assured that won’t happen.
One of the biggest advantages of saving bonds is that they are backed by the full faith credit of the American government.
In layperson’s terms, that means that you are not loaning money to a commercial entity but to the government. For that reason, these bonds are considered some of the safest investments for your money.
6. Boost your retirement savings
Now that you have excess money in the bank, it may be a smart time to increase your retirement savings. It’s important to know your contribution limits.
Be sure to check the yearly allowance for IRA contributions guidelines before you start topping it up.
The truth is that many people out there lack a proper plan. One in four Americans doesn’t have any retirement savings whatsoever.
If you fall into that category, now is an ideal opportunity to rectify things by creating a sustainable savings strategy.
Other more unique ways to grow $50k in cash!
While real estate, bonds, and retirement investing are all good options for your $50k, there are other ways to use the money. Here are a few ideas:
7. Buy artwork that appreciates
Are you a creative person or just someone who appreciates art? If the answer is yes, you can use your 50k to invest in some masterpieces.
There are many ways to invest in this sector. You can check out the U.S. News guide to buying art as a first port of call.
Consider whether you want to invest in individual pieces, look into fractional share agreements, or even throw your money into an art fund. The more research you do about the world of art, the better position you will be in when it comes to buying some.
8. Invest in a startup
A startup is a new business that often needs investors to help it grow. You can be part of this!
It can be somewhat risky, but you can increase your chances of success by researching and really understanding the startup before investing money.
You can be paid in a few ways, including shares and interest.
Help crowdfund a startup by checking out sites like Wefunder or StartEngine.
9. Invest in farmland
Owning farmland can be a lucrative investment. You can make money from rent as well as appreciation.
In addition to simply purchasing farmland, you may also choose REITs or crowdfunding to start your investing.
10. Consider cryptocurrency
This is definitely a more alternative method of making money, but it can be profitable. However, buying crypto is not without risk and should be considered carefully.
Cryptocurrency is a new type of digital currency that you can buy. It isn’t something that immediately makes a profit but may benefit you long term. If the prices for crypto increase, you can sell what you own for a profit.
There are a variety of cryptocurrency options. Check out Coinbase to purchase this currency.
11. Invest for your child’s education
A great way to invest your money is to start saving for your child’s future. A college 529b plan is one option for storing money for college.
You might also consider investing in another way, such as a custodial account or even a regular investing option like index funds that you can use later for their education.
Mistakes to avoid with 50k in cash
If it’s the first time that you’ve had this much money or wondered what to do with 50k in savings, you may be excited and want to start using it.
That is completely natural, but you need to slow down. Here are some key mistakes to avoid:
Failing to invest
Having your entire $50,000 sitting in your bank account won’t do you any favors. While it may seem like the obvious move when you don’t know where to start, you are wasting an opportunity here.
You need to be sure that you are making a reasonable return on this money by investing properly. Take a look at our list of ideas or seek independent advice on the issue.
Splurging it all on vacations
Fancy heading off to Barbados? What about jet-setting to Dubai?
While we all deserve a treat now and then, spending all of your money on a luxury vacation is a mistake. When it’s over, your bank account will be empty, and you won’t have anything left to show for it.
That doesn’t mean that you have to invest all of your money. Splurging a little on yourself means that you can get it out of your system.
If there is something that you have always wanted, see if you can afford it. Set aside some cash for vacations and extravagances.
Giving the money away recklessly
Be sure to keep your 50K in cash safe! Whether you fall foul to an online scam or give your money away to someone you know, there’s no doubt that you will regret doing so.
It’s a sad fact, but when people know that you have money, they may try to extract it from you.
While there’s nothing wrong with helping out someone who is truly in need — such as a close friend or family member — be aware that people may try to take advantage of you.
Ensure that you are doing things for the right reason and not because you feel that you have no other choice.
You can create great opportunities by being smart with your 50k!
Knowing what to do with 50k doesn’t have to be challenging. The truth is that this is an opportunity, and you can easily grow your money. You might choose to start a business with 50k, invest, or do something else.
In this guide, we’ve covered some of the most effective strategies you can use to make a good return on the lump sum of money.
Use it as inspiration when deciding what to do with your newfound wealth. You might also want to speak to a financial advisor or get independent advice on what the next steps could be for your savings.